Turnaround, Anyone?

Turnaround, Anyone?

A Successful Racket

In three years, Larry Scott has dramatically improved the fortunes of woman's professional tennis. It started with a deft touch, a balance of listening and leading.

CEO by Mark Gordon | Managing Editor

One of the first phone calls Larry Scott received in 2003 after being named the new chief executive of the business behind woman's professional tennis could humorously be described as congratulatory.

If Scott was into gallows humor, that is.

Arnon Milchan, a powerful and deep-pocketed Hollywood movie producer was on the other end of the phone. Milchan's Regency Enterprises still had three-plus years left on a seven-year $120 million dollar deal to televise woman's tennis events worldwide through the Eurosport network.

Welcome aboard, we're glad you're here and all that good stuff, Milchan told Scott, who had previously met each other.

Then, the bomb: Ratings are tanking and we're disappointed in the product, Milchan told Scott. There's a new TV deal in the works, Scott was told, it's not negotiable and it'll be worth about 25% less then the old contract.

The phone call was a perfect-serve illustration of the mess Scott, now 42, inherited. One the one side, he was in charge of a St. Petersburg-based multimillion-dollar global business, one with millions of adoring fans and a product that could draw those supporters from a variety of lucrative demographics, including those following the fashion, entertainment and sports industries.

But the business was flailing, if not downright failing. It was running a million-dollar plus deficit, revenues were down almost 40%, and its board had turned into a bickering mess that was micromanaging as opposed to overseeing. Attendance was down, prize money was flat and an on-court issue was simmering as some top-ranked players were skipping events, diluting the potential match-ups and upsetting tournament sponsors. Finally, it had churned through three CEOs in the past six years.

"As a business," Scott says, "it was struggling. It was a precarious time."

Daunting work, even for a guy as polished as Scott, a Harvard graduate who speaks fluent French, had traveled the world by the time he was 16 and had just come from a top executive position with the men's tennis tour, where among other tasks, he personally tried to convince Pete Sampras to add some pizzazz to his game.

Three years later, Scott is in the midst of orchestrating a massively successful turnaround project: Overall tour revenues are up 74% since Scott took over, from $21.4 million in 2003 to $37.2 million in 2006. Sponsorship revenues are up significantly too, from $4.3 million in 2003 to $18.8 million in 2005, a whopping 337% increase. Finally, attendance has increased about 10% over the past three years.

The business, now known as the Sony Ericsson WTA Tour, kicks of its 2007 season with the Australian Open Jan. 15.

'Traveling circus'

Scott has been publicly lauded for his leadership efforts in reshaping the tour, with praise coming from players, advertisers and tournament sponsors. But he says one of his best compliments hangs on the wall of his office in the tour's headquarters, on the 15th floor of the Bank of America building in downtown St. Petersburg.

There, in between autographed magazine covers and other glossy pictures, hangs a picture of Scott and Milchan with the two 2006 Wimbledon finalists, Amelie Mauresmo and Justine Henin-Hardenne. It was there six months ago that Scott presented Milchan with the new TV contract. This one, a five-year agreement, is worth 30% more than the last shaved-off deal.

At its core though, Scott's success in turning around the tour is a lesson in management techniques and leadership style. Woman's tennis is all-encompassing in the truest sense: There are more than 1,100 players representing 70-plus nations, competing in 65 tournaments played over 12 months in 35 countries, including Korea, Russia and Israel; Scott's fond of calling it a traveling circus.

"In a business like ours, it's like being head of a government and head of a business," says Scott. "It requires a different type of leadership style. It's not just about the financial numbers."

Scott's first move was to go on a tour of his own, a listening tour to hear from the various sides that make tennis go, including advertisers, sponsors and players. All sides had a big stake, backed up with big opinions.

Tournament sponsors for example, are like the tour's team owners, putting up money in the hopes of getting a good return. So one of Scott's missions was explaining to players, many of whom were known for their independent attitudes, that skipping events would hurt the tour in the long-term. "Sometimes you feel like a monkey in the middle," says Scott, "but that's part of the fun of it."

Scott also listened to advertisers, about what they need out of the tour. The dramatic increase in sponsorship revenue has been one of the brightest points of the tour's turnaround.

Sanex, a body care product division of Sara Lee Corp., had dropped its global sponsorship in 2002. But through dozens of upbeat and optimistic conversations, Scott convinced several sponsors that the tour was improving, on and off the court. Advertisers that have signed up since 2003 include Bed Bath & Beyond, Gatorade and Wilson.

And in January 2005, the tour signed a six-year, $88 million dollar sponsorship deal with mobile phone company Sony Ericsson. It was the largest deal ever for both tennis and women's sports.

A clear mission

Scott moved quickly from a listening phase to a talking phase as he set about his agenda for reshaping the tour. In retracing the steps he took, Scott sounds like a U.N. peace negotiator settling a civil war. His statements are sprinkled with phrases such as diplomacy and "winning the hearts and minds."

Running the Sony Ericsson WTA Tour isn't Scott's first leadership role. While a student at Harvard, the New York native was captain of the tennis team and was a leader during the Prentice Cup, a tennis tournament pitting Harvard and Yale against Oxford and Cambridge.

After college, he played on the men's tennis tour for three years, winning one tournament. He took to leadership there, too: As a player he served as vice president of the ATP Player Council, a union-like organization. He also worked in executive roles with the men's tour for ten years.

Those positions taught Scott that in a sport like tennis, with so many different factions and groups to please, there has to be a clear, companywide mission. In the beginning of his tenure, that mission was to get the sponsors and advertisers back - and keep them.

As Scott began doing that, he also began to retool the tour's business structure. He created a five-year fiscal plan and he brought in Harvard Business School professor Jay Lorsch, who spoke to the tour's employees about decision-making. He has also started an internal guest speakers series for players and tour personnel at Grand Slam events; two recent prominent speakers were NBA commissioner David Stern, who spoke about revenue sharing and NHL commissioner Gary Bettman, who spoke about hockey's labor contract issues.

Scott took tour executives and managers on a retreat late last year at Saddlebrook, a Wesley Chapel resort and tennis club, to continue refining the turnaround process. The staff went through a SWOT analysis, where they focused on the challenges and opportunities the tour will face in the next five years. Those revolve around Roadmap 2010, says Scott, which is a plan he and his staff implemented to improve the on-court game through rule and schedule changes.

Tips from the top

Larry Scott has been chairman and CEO of the Sony Ericsson WTA Tour since March 2003. Before that, he was COO of the men's tennis tour. Here are few pointers from Scott on how to manage large and diverse businesses:

Control: There's a lot of issues that keep Scott up at night, such as security for the players at events, terrorism and drugs in sports, not to mention "getting blindsided by the things you can't see coming." But his best advice is to recognize early on what's in your control and what's not. Then, stick to the things you could do something about.

Humility: Scott says he's been gifted with talented players who have interests outside the sport, which has increased the tour's reach and fan base. In managing that gift, Scott constantly reminds himself to be a "steward with what I've been given."

Listening: Scott learned a lot of his listening skills from his father, a lawyer who took the time to talk with anyone, from janitors to judges. Says Scott: "To be a great leader, you have to be a great listener."

-Mark Gordon